The Future of Money: The 3 New Ideas You Need to Know this Week (Issue 26 - 17 January 2021)

Dear Friends, 

Welcome back to my weekly newsletter where I share some of the major developments on the future of money that you need to know about!

Make sure to subscribe (and join the 20,000+ others who have done so) to receive your Future of Money newsletter in your inbox every weekend! 

If you enjoy this content, you will also love what I post on Twitter (@HenriArslanian) and the library of videos on my YouTube channel.

Here we go!

1. Did Bitcoin from France Fund Last Week’s Washington Riots?

The fallout from last week’s chaos at the US Capitol building that left five people dead continues to unfold. 

Now, some reports have started to trickle out about the curious, and sudden, infusion of large amounts of Bitcoin donations to many of the most notorious right wing personalities that participated in the Capitol violence in the weeks leading up to January 6.

Crypto forensics firm Chainalysis published an analysis stating that Nick Fuentes, a prominent member of the alt-right, was one of many figures on the receiving end of a suspiciously large Bitcoin transaction less than a month before the riot. 

The origin of the donation?

A 35 year old computer programmer based in France who committed suicide after sending those Bitcoins.

In its investigation, Chainalysis shows that on December 8, a mysterious donor sent approximately $522,000 worth of Bitcoin to 22 separate addresses in a single transaction. 

And nearly every single address belonged to known activists and personalities on the American far right.

Fuentes, who was banned from YouTube last year, frequently speaks in anti-semitic terms and talks about the need to protect America’s white heritage, in addition to promoting the killing of state and national legislators. 

And that $522,000 worth of Bitcoin made December 2020 the biggest ever month in terms of cryptocurrency received by domestic terror organisations.

Source: Chainalysis

As we have touched upon in previous issues of this newsletter, the use of Bitcoin and other cryptocurrencies for illicit purposes is in practice quite low, with only 1.1% of all cryptocurrency transactions used for illicit purposes (with the majority of that linked to ponzi schemes that are not crypto specific).

For example, in 2019, Chainalysis traced $2.8 billion in Bitcoin from criminal entities to exchanges, with just over 50% going to two specific exchanges, namely Huobi and Binance.

That is still a rounding error when you consider that, according to the United Nations, the estimated amount of money laundered globally is between 2 - 5% of global GDP, or up to 2 trillion in current US dollars.

Meanwhile, many questions remain about the origin of this large transaction.

All we know is that this donation originated from a wallet that was linked to an account at a French crypto exchange. 

French media later identified the address as belonging to a French national who was an early adopter of Bitcoin and who committed suicide on December 8th, with his suicide note published online. 

Beyond that, the actions of this donor remain clouded in mystery.

Ultimately, these murky donations are a sign that the cryptocurrency activity of dangerous groups need to be diligently tracked, as law enforcement already does with fiat and banking transactions. 

But unlike fiat money, most cryptocurrencies are traceable and allow law enforcement to see where the funds are moving in real time.

Whilst there are some tools like mixers or scrupulous brokers that still allow criminals to launder their crypto without asking the required questions, the reality is that such activities are becoming increasingly difficult and risky.

A recent bipartisan bill in the US House of Representatives that is looking to set-up a task force on this topic is a step in the right direction.

Definitely a development to follow.

Pic of the Week

2. Crypto Exchange Volumes (and Google Searches) Hit Record Highs!

The last couple of weeks have seen (perhaps unsurprisingly!) record volumes at crypto exchanges.

Volumes at spot exchanges for the month of January are currently hovering at around $500 billion and have already surpassed December highs, a record at the time.

Source: The Block, CryptoCompare

Meanwhile, things are no different in the crypto derivatives markets, with open interest for Bitcoin futures hitting an all time high, as well. 

Source: The Block, Skew

And several other data points that have been emerging over the past few weeks provide us with some interesting takeaways.

For instance, the number of daily active Bitcoin addresses hit a new all time high on January 11th, with over 1.3 million Bitcoin addresses active in a single day, according to Glassnode. 

Source: Coindesk, Glassnode

2020 saw some amazing milestones for Bitcoin and the broader crypto ecosystem.

Looks like 2021 is on track to break many more new records! 

Money Quote of the Week

“If inflation continues to soar, you’re going to have to work like a dog just to live like one.”

George Gobel

3. China Launching a CBDC Lottery and a Digital Yuan ATM?

As we have covered in previous issues of this newsletter, China is years ahead of most of the world when it comes to the future of money.

If you’re looking for proof, look no further than the large volume of transactions of the country’s new CBDC (also known as DCEP, the digital yuan, e-RMB, or e-CNY), with roughly 2 billion RMB (or US$300 million) having been moved thus far.

The new year saw China hit yet another significant milestone in its CBDC experiment, with Shenzhen, the country’s high-tech hub, kicking off a lottery. The prize? 20 million digital yuan, or over US$3 million.

This lottery is just the latest in a series of high profile events that have been designed to test the feasibility, along with public perception, of this new form of money, with Shenzhen holding a similar lottery three months ago.

As part of this latest go round, 100,000 digital red envelopes were distributed to residents of the city, with the winners having 10 days to spend their prize at any of the 10,000 physical merchants that have signed on to participate in this experiment.

Source: Henri Arslanian GIF page

The sheer number of merchants that have jumped aboard the DCEP train is impressive, with every actor (the People’s Bank of China, commercial banks, merchants, and the public) seemingly aligned towards preparing for the arrival of the digital yuan.

So if anyone out there is wondering what the future of money looks like, look no further than China.

My Crypto Capsule Commentary This Week

Answering your questions from all around the world!

My Educational Video this Week

What problem does Bitcoin solve (in less than 3 minutes!)

My Upcoming (Virtual!) Speaking Engagements

18 January - Asia Financial Forum

20 January - Digital Davos

21 January - Asia WealthTech Forum

28 January - Cognito Virtual Conference

Enjoyed this content? Make sure to subscribe or share it with a friend! A new Future of Money newsletter will be in your inbox each weekend!

See you all next week!! 

Henri Arslanian

*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with.

Who is Henri?

Passionate and focused on the future of finance and money, Henri Arslanian is the PwC Global Crypto Leader, the former Chairman of the FinTech Association of Hong Kong and an Adjunct Professor at the University of Hong Kong, where he teaches the first FinTech university course in Asia.

Henri advises many of the world’s leading crypto exchanges, investors, financial institutions and tech firms on their FinTech and crypto initiatives as well numerous governments, regulators and central banks on Fintech and crypto regulatory and policy matters.

 With over 500,000 LinkedIn followers, Henri is a TEDx and global keynote speaker, a best-selling published author and is regularly featured in global media, including Bloomberg, CNBC, CNN, the Wall Street Journal and the Financial Times.

Henri was named by LinkedIn as one of the global Top Voices in Economy & Finance and is the host of the FinTechCapsules? and CryptoCapsules? social media series.

Henri was recently named by Onalytica as the #1 most influential individual on Finance globally on LinkedIn out of 50k+ individuals working at the top professional services and management consulting firms in the world. 

Chambers Global also named Henri the “highest profile FinTech consultant in Hong Kong” and Asian Private Banker awarded him the “FinTech Changemaker of the Year” award.

Henri’s latest book, The Future of Finance: The Impact of FinTech, AI and Crypto on Financial Services, published by Palgrave Macmillan, was ranked as one of Amazon’s global top 10 best-sellers in financial services and was recognized as one of the “Best FinTech Books of All Time” by Bookauthority.

Before joining PwC, Henri was with a FinTech start-up and previously spent many years with UBS Investment Bank in Hong Kong. Henri started his career as a financial markets and funds lawyer in Canada and Hong Kong.

You can learn more about Henri on his website (www.henriarslanian.com) and you can reach him at [email protected]